14 December 2005


Chris Anderson of The Long Tail believes that he's "hacked" Google's AdSense/AdWords online advertising system:
Google ads are pay-per-click. They're based on an auction model, so for each keyword/phrase the best performing ads (some combination of those that generate the most clicks and those who will pay the most for those clicks) rise to the top, displacing others. For popular keywords, I'm sure that's an efficient, highly-optimized model.

But I chose a bunch of very obscure terms to advertise against. And my ad sucks (see above) and nobody ever clicks on it. The result is that I get hundreds (sometimes thousands) of impressions a day for free. Every now and then Google notices that my ad isn't performing, so I have to raise the price I'll pay for each click (I'm now at $0.40). But since I get no clicks it doesn't matter.
Anderson thinks that the value of this free advertising is "at most a couple bucks a day" and his takeaway is "probably close to zero"; a few commenters on his post doubt that he's receiving even that much value. One writes, "At best, the value received for this is zero. At worst, hes [sic] doing himself some brand damage." Another characterizes Anderson as "one more unsuccessful Google advertiser".

This is all quite interesting, but what's more intriguing is something Anderson requests of his audience at the end of his post (emphasis in original): "[I]f anyone were to actually click on the ads, I'd quickly lose whatever gains I've made (if you do happen to see my ad out in the wild, please don't click on it)."

California law, which, according to the AdWords Program Terms, applies to Anderson's transaction with Google, implies a covenant of good faith and fair dealing in all contracts between parties entered into in the State of California. Does Anderson's request violate this implied covenant?

Suppose Able and Baker enter into an arrangement whereby Baker agrees that, if he fails to sell the prior day's freshly-baked bread, Able can have these loaves at no charge and Able agrees that, to the extent that his bread needs on a particular day are not satisfied by Baker's freebies, he will buy bread exclusively from Baker at an above-market rate. So far, so good -- Baker has a reasonable expectation that his bargain will make him some dough -- but if Able proceeds to stand in front of Baker's shop asking potential customers not to buy any bread from Baker, so as to create a surplus of unsold loaves that day for his gratis consumption the next . . . well, we can suppose that Able will get a rise out of Baker, to say the yeast. The upshot of all this is that one implication of Able and Baker's bargain is that Able will not manipulate the details of the transaction to deny its benefits to Baker; in other words, it is not contemplated under the parties' agreement that Able will actively impede Baker's flow of customers -- he's expected to loaf.

Just as Baker accepts that a certain number of freebies will pass Able's way, Google accepts that advertisers like Anderson will get a certain number of free ad impressions -- those appearances of the ad which do not generate a click-though by a viewer. However, just as Able wasn't permitted to drive business away from Baker's shop to reap more freebies for himself, I think Anderson's on shaky legal ground driving prospective ad-clickers away from his ads and denying Google their reasonably-anticipated AdWords revenues from him.

So, if my guess is correct and Anderson's in breach of his implied covenant of good faith and fair dealing with Google, what's his liability? Since this is Google and not Microsoft with which he's dealing, it's unlikely that Anderson will be half-hung, drawn and quartered. The Program Terms disclaim "consequential, special, indirect, exemplary, punitive and other damages" and provide that Anderson's probable liability would be measured by Google's lost per-click values. As Anderson cheerfully admits, his ad "sucks"; Google's losses due to his passing interference with his audience's natural ad-clicking tendencies are almost certainly negligible. A measure of damages more to Google's liking might be that suggested in a comment to Anderson's post: "Chris, how much will you pay us not to click on your ad?"

Most likely, Google will not notice Anderson's transgression (although titling his post "Cheating Google 101" was a good way to increase his chances of getting some attention from Mountain View). If noticed, a law firm nasty gram and a cancelled agreement would probably be the extent of his legal woes. Still, considering that this is a transaction where the "actual benefit . . . is probably close to zero", it wouldn't take much legal woe to create an actual detriment somewhere south of zero.

UPDATE: Chris Anderson writes, "Read the whole post . . . . I think he's joking."

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